Va. Hosp. & Healthcare Ass'n v. Roberts
| Decision Date | 27 April 2023 |
| Docket Number | Civil Action 3:20-cv-587-HEH |
| Parties | VIRGINIA HOSPITAL & HEALTHCARE ASSOCIATION, et al., Plaintiffs, v. CHERYL ROBERTS, in her official capacity as Director of the Virginia Department of Medical Assistance Services, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Virginia |
This case involves the Virginia General Assembly's approval of Budget Item 313.AAAAA (the “Downcoding Provision”) on April 22,2020. Submitted in response to the COVID-19 pandemic, the Downcoding Provision was designed to limit costs associated with Medicaid and Medicare patients' overuse of hospital emergency rooms (“ER”) for situations that Virginia's Department of Medical Assistance Services (“DMAS”) concluded were avoidable ER visits. The Downcoding Provision attempts to achieve this effect by downcoding or capping the reimbursement rates that healthcare providers can receive for certain services they provide to covered patients if the final diagnosis that the patient receives is found on a list of avoidable emergency diagnoses.
Plaintiffs in this case are Virginia Hospital & Healthcare Association (“VHHA”), The Medical Society of Virginia (“MSV”), and Virginia College of Emergency Physicians (“VACEP”) (collectively “Plaintiffs”). They argue that the Downcoding Provision's denial of payment for services already rendered is impliedly preempted by federal law, a violation of the Administrative Procedures Act (“APA”) constitutes a per se taking without just compensation in violation of the Fifth Amendment to the U.S Constitution, and they seek to permanently enjoin Defendants from implementing or enforcing the provision.
Defendants in this case are lead officials who represent either Virginia or federal government agencies tasked with overseeing Medicaid and Medicare services and regulations. The only Virginia state Defendant, Cheryl Roberts, is being sued in her official capacity as Interim Director of DMAS.[1] The remaining federal Defendants are Secretary Xavier Beccerra, in his official capacity as Secretary of the U.S. Department of Health and Human Services, and Chiquita Brooks-Lasure, in her official capacity as Administrator of the Centers of Medicare & Medicaid Services (collectively, “CMS” or “federal Defendants”). Defendants argue that the state and federal agencies were within their lawfill authority to approve and implement the Downcoding Provision and that the capping of reimbursement rates does not violate the Takings Clause of the Fifth Amendment.
This matter is presently before the Court on DMAS' Motion to Dismiss (“DMAS' Motion,” ECF No. 57), filed on October 6, 2022, and the Plaintiffs' and CMS' Cross- Motions for Summary Judgment (ECF Nos. 52, 54), filed on September 6,2022, and October 6, 2022, respectively. All parties have submitted extensive memoranda supporting their respective positions, and oral argument was heard on February 7,2023. For the following reasons, DMAS' Motion to Dismiss will be converted to a Motion for Summary Judgment and will be granted. Plaintiffs' Motion for Summary Judgment will be granted in part and denied in part, and Defendants' Motion for Summary Judgment will be granted in part and denied in part.
As a threshold matter, courts generally may not consider materials outside the complaint in ruling on a motion to dismiss without converting the motion to one for summary judgment. See Fed.R.Civ.P. 12(d); see also Hickey v. Bon Secours Richmond Health Sys., No. 3:12CV691,2012 WL 6623039, at *2 (E.D. Va. Dec. 19,2012) (). It is well settled that district courts may convert a Rule 12(b)(6) motion to dismiss into a Rule 56 motion for summary judgment, allowing them to assess whether genuine issues of material fact exist. See, e.g, George v. Kay, 632 F.2d 1103, 1106 (4th Cir. 1980); see also 5C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1366, at 159-65 & n.17 (3d ed. 2004) ().
Federal Rule of Civil Procedure 12(d) states: “[i]f, on a motion under 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.” In considering whether conversion is appropriate, the district court must consider whether the parties had adequate notice and “a reasonable opportunity to present all material made pertinent to such a motion by Rule 56.” Finley Lines Joint Protective Bd. Unit 200, Bhd. Ry. Carmen v. Norfolk S. Corp., 109 F.3d 993,996 (4th Cir. 1997). “Where plaintiff has actual notice of all the information in the movant's papers and has relied upon these documents in framing the complaint the necessity of translating a Rule 12(b)(6) motion into one under Rule 56 is largely dissipated.” Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42,48 (4th Cir. 1991).
Here, both DMAS and Plaintiffs had ample opportunity to present relevant materials regarding each of their motions. Extensive briefing was submitted in support of and opposition to the issues raised in both motions, and all parties had a reasonable opportunity to present all pertinent materials to this case. Additionally, on February 7, 2023, this Court heard oral argument on all pending motions at which time all parties presented argument. Given the development of the record and extensive briefing, this Court concludes that DMAS' Motion should appropriately be converted into a motion for summary judgment, and the Court will consider it as such.
In reviewing cross-motions for summary judgment, the Court must consider each motion separately on its own merits to determine if either party deserves judgment as a matter of law. Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (citations omitted). In considering each motion, the Court will resolve any factual disputes and “competing, rational inferences” in the light most favorable to the opposing party. Id. (internal quotation marks and citation omitted). The following narrative represents the undisputed facts for the purpose of resolving the cross-motions for summary judgment.
“Medicaid is the nation's public health insurance program for those of limited means.” Planned Parenthood S. Atl. v. Baker, 941 F.3d 687, 691 (4th Cir. 2019). It provides health insurance coverage to low-income children and their families, the elderly, pregnant women below a certain income level, and the disabled. Id.', see also 42 U.S.C. § 1396a.
Unlike Medicare, which is administered exclusively by the federal government, “the Medicaid program functions as a partnership between the federal government and the states.” Maryland Dep't of Health & Mental Hygiene v. CMS, 542 F.3d 424,429 (4th Cir. 2008). CMS is the federal agency within the Department of Health and Human Services that administers the Medicare program and works in partnership with state governments to administer Medicaid. The federal government provides federal financial assistance to each state for the costs incurred by that state for patient care. In return, the state must pay its share of the costs and comply with the Medicaid statute and any administrative regulations promulgated by CMS. See Baker, 941 F.3d at 691.
States propose and submit “plans” for approval by CMS, which reviews the plans to ensure they “conform[] to the requirements of approval.” 42 U.S.C. § 1396a(a)(1); see also id. § 1396a(b); 42 C.F.R. § 430.10. Amendments to these plans, referred to as State Plan Amendments (“SPAs”), must likewise be submitted to CMS, and CMS must “determine whether the plan continues to meet the requirements for approval.” 42 C.F.R. § 430.12(c)(2)(i). If a state's plan or SPA is inconsistent with federal requirements, those inconsistencies can be grounds for CMS to deny approval or withhold Medicaid funding in whole or in part. 42 U.S.C. §§ 1396a(b), 1396c.
Virginia, like every other state and commonwealth, participates in Medicaid. Its state Medicaid program is administered by DMAS. See 12 V.A.C. §§ 30-10-10,30-2010. DMAS does so through both a traditional fee-for-service program and a managed care program. See 12 V.A.C. §§ 30-12-370, 30-120-610. Under the fee-for-service Medicaid program, beneficiaries seek services directly from providers, who are then paid directly by DMAS. Under the managed care program, DMAS contracts with various managed care organizations (“MCOs”), which in turn provide medical services to beneficiaries by contracting with a network of physicians, hospitals, and other healthcare providers. Most Virginia Medicaid beneficiaries receive coverage through an MCO.
“Emergency Services” are defined as inpatient and outpatient services that “are needed to evaluate or stabilize an emergency medical condition.” 42 U.S.C. § 1396u-2(b)(2)(B). Under § 1396u-2(b)(2), every state's Medicaid program must “provide coverage for emergency services ... without regard to prior authorization or the emergency care provider's contractual relationship with” an MCO. Id. § 1396u-2(b)(2)(A)(i); see also 42 C.F.R. § 438.114 ().
An “emergency medical condition” is defined by the so-called prudent layperson standard. 42 U.S.C. § 1396u-2(b)(2)(C). It is a “medical condition manifesting itself by acute symptoms of sufficient severity (including severe pain) such that a...
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